Friday, November 24, 2006

Economics, Sexy is Not

Yoda told me to work the word ‘sex’ into the title of every boring article I post. Marketing guru he is.

My experience studying Economics undergrad had me convinced that the whole discipline had drank the Kool Aid and was suffering en masse from the hallucinatory aftereffects. But as I have aged slightly out of rebellion and spent more time thinking about it, I have come to a realization. Although Econ is not and can never be a predictive science, it is a powerful strategic one.

Remember how 20 years ago everyone always made fun of the weather guy? It was because he was wrong so often that flipping a coin would produce relatively favorable results. Have you noticed that no one disses on the weatherman anymore? What happened?

The discipline of meteorology has had pretty good mathematical modeling capabilities for a while, but suffered from both a lack of sufficiently powerful computers and insufficient high quality real-time data to feed into the models. Over the past decades, computers have become much faster and we have built more observational capabilities (radar, ocean currents, etc.). So within a relatively short time, the discipline has begun producing more than respectable results.

So that begs the question – has the same thing happened with Economics? Get ready for a simple and clear answer, and enjoy it because this is the only time you will ever get one when talking about Econ. No. Hell no. Not only has it not, but it never, ever will happen. Why? It is partly that most of the weather guys are working together. But mostly it is because no one screws with the weather while someone is trying to predict it.

The most important (and annoying) phrase in Economics is “Ceteris Paribus”. It means ‘all other things equal.’ It is a way of making impossible real world problems into simplified theoretical ones by pretending everything that you don’t or can’t understand doesn’t exist. If you think that sounds farcical, then you get it. Ceteris Paribus strips out the immeasurable and the dynamic by locking all external things in place.

Think of the economy as a biosphere is the best way to get your mind around it. It is complex ecosystem consisting of many entities that compete, cooperate, and adapt. Information that is added into this system is quickly processed and used for decision making. The information is destroyed by its own discovery, because after it makes its way to participants, they add it into their decision making processes.

Say you are a caveman, and you discover a valley full of deliciously meaty defenseless creatures. This information has a very high value until you use it. When you show up at dinner with a bag full of barbecued tribbles, you are everyone’s best friend. But you are either going to tell someone else where you found them, or they will find them as well now that they know that Tribble Valley exists. The tribbles are eaten, and you are back to being the blingless 5th smallest caveman in your tribe. The key to exploiting information is to find a way to mine it while keeping it secret, and this is very difficult to do in an efficient, liquid, and open market. Ask a good fund manager what happens when they try to take a position in a small stock they like.

So Economics can’t predict anything useful in the real world, because all the decision makers have the same information as the predictor. But it is very good at illuminating the likely course of action from the point of view of players given a theoretical scenario. In other words, it is very good at what-ifs. This is not particularly useful for day-trading or even investing (although paradoxically it would be if no one else used it). But it is hugely useful if you can take the what-ifs and use them to manage risk and change law.

The end goal of the science of economics should be to inform public policy with the goal of creating a strategic space for all players that maximizes the public good. Economics is ultimately powerful as a tool of logic, showing us the optimal bridge to wherever we want to go. But choosing the location and agreeing on the starting point are non-trivial, and entirely up to us. Whoever ‘us’ is.

Friday, November 17, 2006

Intelligent Designers are all oxymorons, and God is an idea.

People that believe in intelligent design (let’s call it ID because I think that is funny) are the intellectual equivalent of the folks that are talking to their psychic right now. For those of you who believe that psychics are real, stop reading now and go look for something dumb, warm, and fluffy to expose yourself to. You believe because you want to, and there is no point pretending to read things that conflict. Construct broken but impassioned arguments for the delusional pleasure of yourself and your ilk elsewhere.

Time for the meat. The core of the ID argument is this: "Life is too complex/beautiful/specialized to have self-evolved without external influence."

While I was writing in bed just now, my little cat jumped on my chest, turned around, and sat down with here stinky little cat ass one inch from my face. If I believed in ID, I might reason something like this: "Wow, look at that wonder of nature, the anus. How perfectly it is suited to its function. It is impossible that something that melds form and function as exquisitely as an anus could be an accident of nature."

The primary fallacy of this argument (and don't get me wrong, there are many) is the opening assumption that something is 'too perfect', 'too amazing', or 'too complex' to have self-constructed because these descriptives are relative to the observer.

The fact that a structure is too complex for an idiot to understand does not mean that it was created by a super-intelligent all-powerful being. Hell, the fact that a structure is too complex for a GENIUS to understand doesn't mean that God made it either.
Seeing God in living things isn't just sloppy logic. It is egomaniacal to a fault. Remember Ockham's razor. Here are your choices:

1. We are too dumb to understand everything, even though we figure out some of the easy stuff.

2. We are so smart that since we don't understand everything, it must have all been made by God.

The best part is that the people that pick #2 are dumber or average than the folks that choose #1. Yeah, don't try to argue with that. You know it’s true. Go irony.

Now I'm not an atheist either. Atheism is as much of a religion as anything else. Anytime you are confident that something does or does not exist without reasonable data to support your position, you are moving into shallow water. I have a friend that is very smart, but is an atheist. I give him endless grief over being as intellectually dishonest as any other religious person. Sometimes he halfheartedly tries to defend himself, but he always rolls over and plays dead. He knows he is wrong. Yeah, Dallas, I'm talking to you.

There is only once answer to the question of faith. It is indeterminate. And since it will always be indeterminate, go find something else to do with your time.

Thursday, November 02, 2006

“Let’s all pull down our pants when I turn off the lights,” she said. I was 10 or so, and my family lived in the moment of nowhere. It might have been somewhere sometime, but at that moment it wasn’t. The closest nearby kid my age was a quarter mile down our dirt road. His name was Freddy. He had an older sister Lynn – I’m guessing she was 12. She was the advocate of the depanting. Their father didn’t live with them. I guess I agreed, because the light went off. My friend was standing near me and I remember him whispering, “Don’t do it – let’s trick her.” We tricked. When she turned the light back on, her pants were at her ankles and ours weren’t. She was pissed.

I had forgotten about this, but I remembered it when I was thinking about something I saw on television last week. There was a guest on some talk show, talking about the way that the relationship between the religious and the secular is so contentious. He said that both sides have to stop trying to find conflict, and instead recognize each other’s right to their beliefs. If we can shift the focus even a little, we will be able to accomplish much more. It was one of those things that is obviously true, but that you don’t think about often regardless of which side you are on. I probably spend 100x more time thinking about how silly I think religion is than about how to cooperate with believers to achieve common goals.

Then I started to think about the argument itself (you can’t really call it a debate). In the fight between one side and the other (let’s call it the loonies vs. the obviously correct) which side has their pants down when the lights come on? At first, I thought the pants on folks were the rational ones. We like to point and laugh. But then I wondered if exposed underwear might represent truth. So that would make pants down the non-loonies. Show us your truth! But we are not an embarrassed lot in general, so I went back to my original intuition. I’m a pants on guy and the downing of the pants in the dark is a mindless act of group-think. (Boy am I lucky the analogy police are off guzzling donuts somewhere). So walking back up-track to examine my mangled train of thought, why did this memory surface when I was thinking about the secular vs. religion thing? It hit me like a ton of molten hot Krispy Kreme glaze. We cannot get along with each other because we both do something that runs directly against the core requirements of the other’s group membership. The mythligious believe arbitrary things without proof, and the agnostheists reject group think.

That part is obvious, but this part isn’t. Religion is a really, really useful thing. Ask Jared Diamond – he’ll tell ya. Religious folks have created a social construct that allows them to climb their way into places in the human strategic space that require a degree of organization, coordinated action, and motivation far beyond the capabilities of those of us bound by logic and Nash reality. I mean sheesh, try to wage a centuries long global war of conquest without a puffed up sense of self-importance. Religion is deliciously useful.

So that is why we keep it around. We change it as needed too, but that takes longer because you have to wait for the folks that were taught the ‘old ways’ to stop whining and die. Interpretations of religions change hugely from generation to generation. The caste system slides away, God stops supporting slavery, women become equal…not small changes. Heck, Old to New Testament – are you KIDDING me? But here is the nut. The whole faith thing is all based on turning the light off, and on everyone pulling their pants down at the same time. It is hard to do that when you know someone is going to be pointing at your wonder woman underwear and laughing when they come back on. That is why we fight each other.
Old men with young girls...

Here is an open question for anyone that reads this. Why do old men become such fools for young girls? I have seen it time and again. Hell, pick almost ANY frosted and/or reverse mohawked retiree and watch him trip over himself when a mildly attractive young woman is present.

I’m not talking about a particularly lecherous dynamic either - just the intoxicated look so many get around female youth. The older they are the less they hide it. Perhaps it was omnipresent and just becomes more visible when people get to old to care what the rest of us think. Like maple leaves turning red in the fall. Analogy police: "Step away from the laptop, sir." Adam: "Drop that eraser or I'll smoke your partner like a salmon."

Concentrate Danielsan. So the question is why. Did evolution teach us that trick, rewarding the fogies that got in a few last pokes with additional progeny to carry on their affinity for intergenerational humpty-hump? I like that explanation, right or wrong. Reminds me of a kid trying to sneak cookies fresh out of the oven. Take that Sergeants Strunk and White.
Sneezing out chicken guts is a very strange experience. Luckily it wasn't real. I had a dream last week that I blew my nose and felt something solid came out. I opened the tissue and there were miniature chicken guts in it – a whole liver, intestines, and heart. I thought about it for days – what could it mean? After intense analysis, I finally figured it out. I have a chicken snorting fetish.

I wrote this as a joke, and I thought it was hilarious. But when I showed it to Ruobing yesterday her first reaction was to wonder what other fetished I've successfully hid from her these past 4 years. I read it again, and while I still think it is funny I got the uncomfortable feeling that it might be one of those things that is funny for the wrong reason...marginal insanity.